Will Prediction Markets Affect Democracy? Take a Bet

Prediction and betting markets are everywhere these days. Turn your head and you will see an ad for Kalshi. Turn on the TV and LeBron James is endorsing Polymarket. Check social media and an influencer’s video about betting on reality TV shows pops up on your feed.

After the Supreme Court’s 2018 decision allowing states to legalize sports betting, the new wave of online gambling has led to the emergence of prediction markets in the mainstream, such as Kalshi and Polymarket. However, these prediction markets are distinct from sports betting and gambling. In prediction markets, people buy and sell event contracts that are tied to whether a specific event or outcome in the future will take place and stipulate the payoff for a correct bet. The terms of those contracts are set by other users, with the prediction market acting as a matchmaker and clearinghouse. In sports betting, the house sets the odds and takes the other side of every bet.

This difference between the two is the foundation of an ongoing legal battle in the US to define prediction markets in order to properly regulate them. Companies like Kalshi and Polymarket have faced numerous lawsuits regarding whether they should be classified as gambling platforms or financial markets. Despite these controversies, these companies continue to expand their reach as more users join and bet on topics ranging from the weather to politics. Polymarket has even struck partnerships with Dow Jones and Substack and Kalshi has deals with CNN, CNBC, and Fox Corporation.

With the 2026 election cycle in full swing, this will be the first election cycle in the US where prediction markets have been ubiquitous on the internet and social media. These platforms are no stranger to allowing bets on elections, politics, and war; there have been high-profile controversial bets on gang-rape charges, insider trading related to US military operations in Venezuela, and the death of Iran’s supreme leader. Even though there is bipartisan opposition to betting on elections and government events, the popularity of these markets in betting on elections is evident; more than $220 million has already been made in bets related to the 2026 midterm elections.

Despite ethical concerns over profiting off of war and elections and issues of insider trading, efforts to regulate these markets in the US rather than outright banning them, like several countries already have, are indicative of how these platforms are inevitably becoming a part of how Americans experience elections and democracy. As we contend with this new phenomenon, it is important we understand how prediction markets disrupt the electoral process and democracy by simultaneously expanding and restricting democratic participation through the commodification of politics.

Prediction markets give non-citizens an economic stake in another country’s elections. For example, in 2024, a French man made over $80 million on Polymarket by betting on Trump’s win for president. This raises concerns over the potential for markets to monetize the manipulation of election results for personal gain. In this way, prediction markets become a potential new agent for foreign interference in elections and a national security concern. Outside actors can manipulate a market through high-volume trades and point to the market as an indicator of their desired outcome. Markets on divisive social and political issues could also be used to increase polarization. In fact, one does not even need a lot of money to influence the markets; research found that a $3,500 bet can move 97 percent of midterm-related prediction markets by five cents or more. This is also not restricted to outside actors; Kalshi recently cracked down on political insider trading in the Minnesota Democratic primary, Texas Republican primary, and Virginia Democratic primary. Former US Representative George Santos received Kalshi’s first-ever lifetime ban for violating rules on market manipulation.

At the same time, prediction markets restrict democratic participation by introducing a financial barrier. In order to participate in these platforms, one needs to have access to capital, resources, and knowledge of the markets, consequently restricting the groups of people who are able to participate. Despite this, prediction markets are being represented in news media as a type of polling and forecaster of public sentiment. This use of prediction markets as information channels misrepresents the reliability of market odds and can dissuade voters from voting. A new study found prediction market odds shape voters’ views on the electability of a candidate, despite voters’ deep skepticism of prediction markets.

Better forecasting and polling are beneficial for policymakers, journalists, and citizens; however, it is dangerous for prediction markets to be framed in the mainstream media as unbiased indicators of public opinion. Prediction markets’ accuracy actually comes from the bets of a few elite betters instead of a large diverse pool of participants, and on the international version of Polymarket, crypto-based, no-ceiling betting invites aggressive high-betters who can shift the markets in ways that do not represent public opinion. Additionally, if prediction market odds do not line up with the announced results of an election, people could claim election fraud. This demonstrates how easily prediction markets can undermine public trust in elections and the democratic process at a time when trust in the federal government is at an all-time low.

Prediction markets are already changing the political landscape of digital democratic participation. The next step is for the US government to decide how they will move forward with regulating these platforms, but this is not without its complications. Polymarket and Kalshi recently expanded their political donations to about $5 million — not to mention Donald Trump Jr.’s role as adviser for Kalshi and Polymarket with investments in both companies through his venture capital firm, 1789 Capital. As increasingly large amounts of capital and influence are infused into these platforms, the burden continues to fall on voters and citizens to contend with the shortcomings of prediction markets.